Congo Must Diversify its Economy and Think about the Post-Oil Era

Congo has assets that should allow it to become a leading economic player if it diversifies its economy.

Congo must develop the private sector in order to create jobs.

The World Bank’s role is to assist Congo in developing policies that address the needs of the population and the economy.

Eustache Ouayoro : « Congo is one of the countries that must make a difference in Africa »

Brazzaville, January, 2013 – In a recent interview with Tosolola News, a World Bank publication, Eustache Ouayoro, the World Bank country director for both Congos (DRC and Republic of Congo), talked about the development prospects for Congo.

Tosolola News: According to you, what are the country’s main assets?

Eustache Ouayoro: Congo has many assets to help it become one of the subregion’s true economic engines: a relatively small population (4.1 million), a growth rate of approximately 3 percent, a population density of 11 inhabitants per square kilometer, and a fairly high level of urbanization (65 percent concentrated in urban centers). It has enough land (ten million hectares), a well developed water system, a favorable climate for agriculture, forests (covering nearly 22 million hectares), and oil and mining resources. Also important are the country’s renewed political stability and the reduction of its debt burden after achieving the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative. Congo is one of the countries that must make a difference in Africa, because it has all the assets that will enable it to advance..

Tosolola News: But there are still some major challenges ahead….

Eustache Ouayoro: In addition to these undeniable assets, it is important to highlight that Congo still needs to overcome a number of obstacles related to its lack of infrastructure, as well as governance problems. Just 36 percent of the population has access to electricity, and close to 80 percent of businesses must rely on generators in order to limit the losses caused by power outages. The Transparency International Corruption Perceptions Index shows that Congo (which gets a very low score) still has a long way to go in the fight against corruption.

Human development indicators are also lagging, with a very high maternal mortality rate (781 deaths per 100,000 births), a low immunization rate (74 percent), a primary education completion rate of approximately 77 percent, a high unemployment rate among young people in urban areas (25 percent), and an even higher unemployment rate among women.

The business climate also needs to be improved. To cite one example, it takes 160 days to create a business in Congo, versus scarcely three days in other countries. According to the World Bank’s Doing Business 2012 Report, which ranks countries based on the ease of conducting business there, Congo is ranked 181 out of 183 countries.

The role of the private sector (excluding oil) also remains very limited, as the economy is largely based on the oil industry, which accounts for 70 percent of GDP, 90 percent of exports, and 80 percent of revenue. Agriculture represents less than 10 percent of the economy and the country has to import 25 percent of its food.

Tosolola News: Why is economic diversification so important for Congo?

Eustache Ouayoro: The dominance of the oil industry leaves the country particularly vulnerable to a drop in oil prices. Furthermore, oil is a capital-intensive industry that does not create many jobs in Congo, as it involves offshore operations with very few linkages to the local economy. Congo must therefore diversify its economy if it wants to combat poverty effectively, because other sectors such as agriculture (including agro-foods) generate more jobs.

In addition, most investments are made by the government and there are few private businesses. The business climate thus needs to be improved. The World Bank encourages private sector development by providing support for infrastructure projects. It is indeed difficult to produce without electricity. There is also the need for roads, railways, and port infrastructure to ensure the transportation of goods in a timely manner and at reasonable prices.

In the age of globalization, if you want to sell, your products have to be less expensive than others and of good quality. You cannot sell for less if the production factors that are linked to electricity, water, or other inputs are expensive and of poor quality. If you do not have qualified personnel who know how to produce and are capable of adapting to new technologies, you will not be competitive.

Tosolola News: Can you talk about how the World Bank is planning to help Congo become a leading economic player?

Eustache Ouayoro: Following the resumption of World Bank operations in Congo after the war, in 2001, there was a need first of all to get the country back on track. The World Bank has been actively involved in the reconstruction of the country and positive developments have taken place, such as the reforms implemented in the telecommunications sector, the forestry industry, and public finance. The time has now come to go further. Under the new World Bank/Congo partnership, special attention will be placed on how to use the exhaustible oil resources and how to envision the post-oil era.

The goal is to help Congo use its resources, diversify its economy, and reduce poverty, because it is not normal for 50 percent of the population to remain poor in a country that has so many financial and human resources, and which has the will to improve the day-to-day life of its people.

Tosolola News: According to you, which sectors should be prioritized?

Eustache Ouayoro: The infrastructure sector is one of the priority sectors in Congo, because a country cannot develop without infrastructure. The Government has embarked on a far-reaching infrastructure development program (electricity production and production capacity have more then tripled, increasing from 172 megawatts to almost 600 megawatts). Very few countries in Africa have an electricity production capacity that exceeds their needs, as is the case with Congo. Many roads are being built, including the Brazzaville-Pointe-Noire road (the section between Pointe-Noire and Dolisie has already been completed). The country has also invested in the railways and the Pointe-Noire port and seeks to improve access to potable water in the cities of Brazzaville and Pointe-Noire in particular.

The selection of investments based on specific criteria still requires considerable effort. These investments must be sound and meet economic and/or social profitability criteria in order to revive the economy while also improving people’s living conditions. Low population density is a variable that must be borne in mind with respect to the selection and type of investments.

The second sector is agriculture. Congo has enough land and water, and thus the potential to become a major food exporter, realizing that Africa’s food needs are projected to reach US $100 billion by 2015.

Oil sector governance must be improved. To that end, Congo needs to comply with the Extractive Industries Transparency Initiative (EITI). Oil revenue should be known, transparent, and paid into the coffers of Government, which will then use this revenue in the most appropriate manner. Vocational training is also a priority sector. A skills training project is being prepared.

New information technologies are also an important vehicle for economic growth with the submarine cable, a regional fiber optic project, which will provide broadband access, along with good coverage in terms of telecommunications at reduced costs, and help create an environment that allows the public and private sectors to be more competitive. With regard to mobile telephone service, there are several operators in the country and a telephone penetration rate of almost 100 percent, one of the highest in Africa. The internet penetration rate is still very low (6.5 percent), but the fiber optic project that the World Bank is supporting should significantly improve internet access.

Tosolola News: Congo’s ambition is to become an emerging country by 2025 but what exactly is an emerging country?

Eustache Ouayoro: I think that this is a good thing because it already gives real direction to the country. What is an “emerging country”? There is no precise definition, but the term refers to countries that have decided to change the course of their history by propelling themselves along the path of development. In many cases, it also refers to countries whose growth rates have been high for very long periods of time and which have become real global players in international trade.

The World Bank has studied the case of 13 countries that have succeeded since 1950 in achieving annual average growth rates of 7 percent over a 25 year period. A high and sustained growth rate over a long period is essential for poverty reduction. It is also important that growth be inclusive. Although Congo’s economic growth rate has been very high in recent years, this rate has experienced highs and lows over the years. Unstable growth rates are generally due to exogenous shocks and the lack of diversification of the economy. Moreover, emerging countries have learned how to benefit from globalization. Congo must trade with the subregion, Africa, and the world and offer diversified, high-quality products.

The World Bank will support Congo in its efforts toward emergence. Important aspects such as good governance, financial transparency, and the participation of the population in the country’s affairs must be taken into consideration. Civil society participation must be neither ignored nor neglected.